Rich Habits Podcast - 72: Financial Checklist for Parents (Current & Future)

Episode Date: July 8, 2024

In this episode of the Rich Habits Podcast, Robert and Austin walk through a 10-point financial checklist every parent needs to complete. Every single one of these points will cause a material change in the financial outcome of your child. Generational wealth is the goal, let's get there together!---Join us for our pre-IPO & angel investing webinar! August 8th at 4p ET. Register now!---Invest into physical gold through your Roth IRA using Preserve Gold. Click here!---Find term-life insurance from Suriance, they're really nice :)---Sign up for your 30-day free trial of the all-in-one personal finance app, Monarch Money! Visit ⁠monarchmoney.com/habits⁠---Join over 43,000+ other investors who read the ⁠Rich Habits Newsletter!⁠ We're growing by +150 subscribers every day and can't wait for you to join us :)---Don't forget to check out NEOS Investments' new ETF, $IWMI -- their Russell 2000 High Income ETF. ⁠Click here to read more about it!⁠---⭐ Download our FREE Budgeting Template – ⁠⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⁠⭐ Earn 5.1% on your savings with a High-Yield Cash Account – ⁠⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⁠⭐ Trade stocks, options, music royalties and crypto on Public – ⁠⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⁠⭐ Get a $35 bonus when you start saving & investing with Acorns – ⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⭐ Automatically buy stock where you shop with Grifin – ⁠⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⁠⭐ Protect your family with term life insurance from Suriance – ⁠⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⁠⭐ Use code “Spotify” for 15% off our 4-module video course – ⁠⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⁠⭐ Optimize your portfolio with Seeking Alpha – ⁠⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⁠---👤 Explore everything Austin does – ⁠⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⁠👤 Explore everything Robert does – ⁠⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⁠❓ Ask us questions for our Q&A episodes – @richhabitspodcast on Instagram📬 Inquire about working together – [e-mail]---Hankwitz Group LLC has an existing business relationship with NEOS Investment Management LLC. The opinions expressed are those of the author, and the author owns several NEOS ETFs.

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Find your advisor at IG Private Wealth.com. Hey everyone and welcome to the Rich Habits podcast, a top 10 business podcast on Spotify. My name is Austin Hankwitz and I'm joined by my co-host Robert Croke. Now, Robert, before we jump into this episode, we are thrilled to announce that we're going to be hosting a webinar all about angel investing and startup equity. We know that there are countless listeners that have built their base and are ready to begin diversifying into other asset classes, including our favorite, which are angel investments, right? Startups. pre-IPO companies. Think Shark Tank. Now, Robert and I have invested into dozens of tech, AI, and consumer startups over the last several years for me and now decades for Robert. He actually even has a pretty funny story where he passed on Uber right before their IPO and he left $7 million on the table. We all live and learn. But we're really excited to share everything that we've learned, especially Robert after that story. But everything we've learned about startup investing, becoming advisors, getting advisors share, equity, things of that nature, right?

All these insider tips and tricks on how you can begin investing into these potential multi-billion dollar companies once they get acquired or even IPO on the stock market. And as always, the webinar is completely free and the people that join us on this webinar will not only be taught about startup investing, but also offer the opportunity to invest in startups alongside us. think SpaceX, Canva, XAI, Figure AI, Apptronic, you heard us talk about that a lot, Open AI, and so many more. We get offered equity in these businesses all the time. And if you join us for the webinar, we'll be able to show you how you can participate as well.

So we're super, super excited about this. It's going to be a lot of information for you guys. But we know that so many of you are ready to take that next step into these types of investments. So register for free using the link in the show notes below. And it's taking place on Thursday, August 8th at 4 p.m. Eastern Standard Time. Cannot wait to see everyone there. We're going to be having a presentation. We'll take some Q&A. And yes, we will show you how you can invest alongside of us into startups, real estate ventures and everything in between. So we'll see you there. All right, Robert, what are we going to be learning in today's episode?

In today's episode of the Rich Habits podcast, things are going to be a little different. We have compiled an amazing checklist of 10 points that every parent should have at their access to not only set themselves up for financial freedom with children, but also set their children up as well. I'm so excited about this because over the past year and a half with the Rich Habits podcast, we get asked all the time. We have small children. We have a newborn. What do we do?

What are our best ways and strategies? And we're finally doing an episode dedicated to that new parent. or that parent that has small children, so they know exactly the best strategies to implement for financial freedom, not only for themselves, but for their children, to get all those hacks and all those tax breaks and really dial it in. And we're so excited about this episode. If you are a new parent, this episode's for you. If you're an expecting parent, this episode's for you. If you plan to have children one day, bookmark the episode, save it in your little notes app, whatever, keep it around. So when you do have children, you know what to do.

And if you know someone that maybe just had a child or you know someone who has a toddler, you know, something of that nature, do them a favor. Send them this episode so they can take advantage of all the tax breaks and all the different hacks and financial strategies that we're going to be sharing in this episode. Now, Robert, first and foremost, right, this episode is going to kind of go in order. I kind of assume, you know, you just took a baby home from the hospital and you're going to kind of approach things one by one here. So as a checklist, the first thing I would be doing is be looking at my health insurance policy,

I want to make sure that I'm adding my newborn to my health insurance policy. Now, if I have an employer-based health plan, the special enrollment period is at least 30 days after your child's birth or adoption. And if you have a federal or a state marketplace health plan, it's 60 days. But don't worry, no matter when you enroll your child sort of in that window, what matters most is that your child is going to have those medical bills covered by your insurance the day they are born or adopted. So don't think about, you know, overcomplicating the sort of window to add or whatever it might be.

You're going to get covered regardless now. This is also considered a qualifying event. So if you need to change your health plan, this could be a great opportunity to do that. Not having to wait for that open enrollment could be a really cool thing for you. Now, in my opinion, the best thing to do, pick up the phone and talk to your insurance provider. Let them know that you have a newborn and that you need to add them to your plan and that maybe you need to figure out if it's a good idea to switch plans. Maybe you could save some money doing that as well.

Yeah, this is a great episode because we, We're going to dial in all of these important factors so you understand it. And like Austin said, make sure you're sharing it with friends, people that have children, people that have children on the way. So you can really help them out in case you're a listener and this doesn't apply to you right now. It's still something good to bookmark for later. So let's get into number two, social security numbers and the importance of it. So get the social security number for the child as soon as you can so you can get rolling.

with the custodial accounts. Some people choose to apply for a social security number when getting the birth certificate at the hospital. And if you didn't do that, you can always just go to your local social security office and do it that way. Just make sure you bring the necessary paperwork because you want to get this tackled sooner than later to make sure everything is covered. Well, Robert, you said it right then, right?

Get it rolling with the custodial accounts, right? The whole reason, of course, you want to have a social security number. But once you've got that social security number, you can now open up a custodial brokerage account. You can use M1 Finance or Fidelity or Schwab or whatever you want. On behalf of your newborn, start contributing $50, $200, $200 a month toward it, invest it into the ETF and index funds that we talk about. And this child's now going to have hundreds of thousands, if not millions of dollars in retirement waiting for them because of the eighth wonder of the world.

And that is time with compound interest, baby, compound growth. Could you imagine, Robert, if your parents just deposited $1,000 for you in an investment account, parked it in the S&P 500, maybe they added 50 bucks a month to it, how many hundreds of thousands, if not millions of dollars you'd have now 50 plus years later? I wish and I hope that over time we can really get this message hammered into the heads of tens and tens of thousands of people, parents especially, because when you let compound interest do its job over decades. It is remarkable how much wealth you can build. And so many people just don't consider setting their children up early when it's the easiest to do. You look at it from a

perspective, it's a newborn. It's a two-year-old. It's a five-year-old, six-year-old. If you start putting that money away now, it costs you a lot less to give them way more later than if you wait until they're 18 or 21 and you want to give them a present of helping them with their down payment on their house or something, so much more efficient for you. And then they will be set up that much better later on. I just love this strategy. And I want to talk about it more. Well, Robert, it's actually funny. I was on Instagram the other day. And my friend Sophia has a two or three year old child. And she was talking about how whenever her child gets like birthday money or like gifts from the grandparents, things like that. But if it's money, she takes like 50 or 60 percent of it and parks it in a high

yield savings account, which is awesome. I was excited for her. But I told her, hey, listen, savings accounts are good, but they're tied to the federal funds rate, which means right now you're making about, what, 5%, 5.5%, 5.5% depending on the account. But as the Fed cuts rates, you're going to start making less and less and less. What you should be doing with the money is open up this custodial, you know, taxable brokerage account on Schwab, Fidelity, M1 Finance. It doesn't matter, right? There's no tax advantages here. It's just a taxable brokerage account and take that birthday money or whatever's in this high yield savings and invest it because the markets are going to do 8, 10, 12 percent year after year after year on average over a long period of time.

which is much more than the four and a half or five percent that's parked in this high-yield savings account. I love this because I grew up from a poor family. My father didn't help me at all. My mother did her very, very best. And it gives me goosebumps to think of how little money and effort parents can make right now listening to this episode and what they can do to totally transform their children's financial lives when they turn 18 or 21 by doing some of these things in this list. It's incredible. I'm excited to get through this. So our next checkpoint here is called the DCFSA. I'm not sure a lot of people are talking about it, but it's really, really important. This is a savings account that you can contribute to pre-tax, allowing you to write off your contributions against your taxable income, right?

And then once you contribute this money into the savings account, right, you're saving now 20, 30% and taxes on that contribution. So $1,000 plus dollars every single year by just using the savings account, you then use that money to pay for things like childcare, summer camps, after school programs, and a ton more things that are qualified purchases with this account. So if your child is 13 years or younger, right, not even a newborn, maybe you're a parent with an 8 year old right now. You should be paying for your summer camp. You should be paying for the nanny that babysits on Thursdays because you want date nights, right? You should be paying for those things out of a DCFSA. Now, we're going to leave a link in the show notes below to learn more. There's going to be a ton of

information on some of these federal websites. Be sure to check it out. There's actually going to be a calculator too that's going to show you how much you can save by paying for these after-school programs and child care, things of that nature, through this account, right? This is not an investment account. You're not trying to, you know, make money here. What you're doing is saving on taxes. And this is going to help you save up to $1,500 a year on taxes. So let's say, for example, Robert, that, you know, you're paying $5,000 a year for child care, summer camps, babysitting, after school program, whatever it might be. $5,000 a year, it's about $400 a month or so.

I think a lot of people are doing that anyway. But you're now paying for it out of this account, which you just contributed money to. Congrats. You just got a $1,500 refund in April when you did your taxes because you paid for these things out of this account. So, you know, if you're looking for extra margin in your budget, this can be a really awesome way to find it. And who doesn't like big tax refunds?

Yeah, I haven't heard anyone talk about this strategy, and that's why I love flushing out these plans to help people because, you know, you're a parent, you have a newborn, you have kids, you have a job, you have all this. Our job is financial education. So we get the pleasure of really digging deep through all of our travels with our CPAs and our lawyers and our research and our team to find all of these strategies and give them to you in a meaningful way so you can digest them and implement them into your day. daily life. And that brings us to number four, planning child care. So many people I feel don't realize how expensive child care is and they don't plan for it. They react to it and the need for it. So I think it is very, very important to understand that. And this is likely the largest expense item you'll be adding to your budget. During the presidential debate last week, they stated that child care costs can be $2,600 a month on average for two children. And that is just a ton of money for most people. So something else people forget about is the waiting period to even get into the daycare.

That's why we say planning and not reacting because you might find that your preferred daycare is a year out, six months out, four months out. You don't know. And so this is something very, very important for you to have ahead of the schedule in your checklist. So you're on top. of this so it's not too late. So make sure you're applying to these top-notch daycares ahead of time. So if there is a wait list, you can get on it ahead of time and make sure you're good to go when the time is ready. And then when you have to pay those child care bills, you pay them out of your DCFSA savings account, right? So you open up the account, you put the money in there pre-tax, which means you can write it off of your taxable income. You get your first bill for child care, whatever it is, pay for it out of the account, right?

So kind of going into some chronological order here. I really appreciate the call out about planning for child care. I know my sister, she's got four children now. I'm super blessed. And she was on a waiting list, I think, for like four months for one of these like places in Atlanta where she lives. So it was a pretty big deal. It kind of pushed back her plans there for a little bit.

But yeah, I mean, this is something that people should have on their radar and should definitely be thinking of, no matter, you know, how young your baby is. Yeah, I agree. Now, the next thing here is equally as important in my opinion. opinion, maybe even more important, and that is to open up a term life insurance policy, have a will, right? We can't predict the future. So if something terrible happens to you and someone is depending on, if that's your spouse and your child, your income every single month to survive and have a good livelihood, and your income goes away overnight because something

tragically happened to you, the last thing that your spouse and children need on their mind is, how are we going to pay our rents? How are we going to buy food? How are we going to buy food? How are we're going to pay for the funeral? How are we going to do these things? Right. So by having a term life insurance policy, keyword, term life insurance policy in place, if something happens to you, your spouse and children just have the ability to be sad, right? They don't have to now be stressed about money alongside grief. So term life insurance, we can't recommend it enough. What we sort of go for here is eight to 12 times your annual income is how much you should have as a policy. So if you make 100,000 a year, you should have a policy of, let's call it, you know, 1 million, 1.2 million.

dollars. And again, what happens is, let's say something bad happened to you, you lost your life, and now this term life insurance policy will pay out a million dollars to your beneficiaries, which in this example, let's say it's your spouse. Your spouse now has this million dollars. They are going to use that to generate income, right? So they're going to invest it in the S&P 500 or some other investment here of an index fund, take off 6, 7, 8% every single year, $60,000, and use that to supplement the income they lost because of you. So that's how you should be thinking about term life insurance. If you now have a newborn in your life, right, it's one thing to be married and you know,

but now you have a child, right? And so that means you should really be thinking about wills, life insurance, beneficiaries, all these different things to make sure that if something happens to you, there's a plan in place giving these people a little bit of flexibility and a tragic, tragic time of their lives. This is definitely eye-opening to me as you were talking through that point. And we really need to do an upcoming episode about how to put together the plan aside from this checklist of the things you should be thinking about doing for the long term leading up to your will, how you structure your trust, how you protect your property and your assets.

So we will definitely get back to that because I think about when my father passed away, just by him not updating his will to properly reflect his current life situation, it ended up being an absolute nightmare, and this is for another episode, of what happened to me, his first son and why I got the shaft in the whole deal. So it's very, very important. And this is something I want to get back to later. And remember, if you're shopping for term life insurance and you're alerted now and you find the importance like we do, you can always use our friends and get a quote from Sureience. There is a link in the show notes below. They do a great job for a lot of our followers and clients. So check it out.

Okay, so let's get into our next point. Guardians and Godparents. And not to be morbid, but staying on the topic of death. If something happens to you and your spouse, your child or children need a plan. This can be written contractually or be arranged in some other way, but don't go through life without a plan for your children if you and your spouse are no longer around. This is so important. People always put it off. It's a taboo subject.

You don't want to talk about something that's 20 years, 30 years, 40 years in the making, you hope, but you should talk about it as early as you can to get a plan in place for the children. Yeah, I mean, I don't know if you guys watch suits, but it reminds me of suits. You know, Mike in the show lost both his parents to a drunk driver, right? Fingers crossed, none of that happens to us or any of our listeners here. But like, that's the type of stuff we're trying to make sure that you kind of keep in the back your mind is like, you know, that was out of their control. I don't know, right?

I'm not trying to say anything that could happen or knock on wood here. But long of story short, have a plan. Figure out guardians, godparents, things like that, where if something does happen, your child has a clear plan until they are of adult age, 18, 22, 30, whatever it might be. Now, moving on from some morbid topics, let's talk about money. Let's talk about budgeting, specifically budgeting for a 529 plan. Now, as you guys know, the 529 plan is my favorite because I'm actually doing this myself for my nephew. and nieces. I've got four of them, and I'm really excited about that. I've got over $5,700 in a Vanguard

$529 account, and it's up 37% all times since I started contributing to it monthly only 12 months ago. Now, this account is to pay for college, right? So let's say, for example, all the money I contribute goes up to, it should be around $90,000 in value over the next, call it 15 to 18 years, just depending on what the stock market does. And let's say all four of my nieces and nephews want to go to college, all four of them can use this $90,000 and all the profits that came with these investments, right, to pay for college. And I'm not having to pay taxes on those profits because it's paying for their college. Now, if they don't want to go to college, that money can then be rolled over into a Roth individual retirement up to $35,000 per child. And then you

take that $35,000, invest it in the S&P 500 on their behalf, make sure they do not touch it until they're 65. And assuming 8, 10, 12% annual returns over their entire lifetime, which I can even begin to predict what the United States or the stock market's going to be by 2100. But once we get there, fingers crossed, right, then they should have well over a million dollars now adjusted for inflation about three, three and a half percent per year in that account for them to enjoy in retirement. When we talk about generational wealth, this is how generational wealth is created. And Robert did a great job in the beginning here, talking about how not only to set up yourself for these little financial tips and tricks, but also your children. And the 529 plan is the best way to do

that and our humble opinion. Something else that people forget about. They say, wait a second. So let's say I've got 90,000 in this account, but my kid's got all these scholarships. What you can do is, let's say your kid is really, they're a great athlete and they get a full ride to college. And so what that does is you can take whatever they would have paid in tuition and you can actually pull that money out, tax free and put it in a checking account and not pay any taxes on it, but it has to be exactly with what that scholarship was. So if they get a $5,000 scholarship, great. Pull $5,000 out of the the 529, tax-free, profits, everything, and enjoy it. Maybe buy him a new car.

Austin loves him the 529 plan, and I just think it's great because it's just another tool in the tool shed to help you really crush it throughout your child's early years and set them up and set yourself up along the way. I love this. Now, Robert, speaking of budgeting, as you know, my girlfriend and I are on this personal finance journey together, and I still believe she is a better budgeter than me. Something she recently started doing that leveled up her budgeting was figuring out the specific days of the month that her subscriptions are supposed to hit her checking account so she can get ahead of them from a spending perspective. Yeah, that reminds me of the Monarch Money app, and they're an all-in-one personal finance app that not only has a built-in manager for your recurring subscription expenses, but they help you easily track your net worth, keep tabs on your spending, and there's even a cash flow forecaster that will show you what you spend.

during the month and how that might impact next month savings. Love this app. Yeah, Robert, as you know, before we started filming, I logged into my Monarch money account. I was showing you how I was using the cash flow tracker, the net worth tracker. It's pretty cool. So Monarch is a top rated all in one personal finance app. It gives you a comprehensive view of all of your investment accounts, right? You just sync them all up and there at all is like a bird's eye view of everything. It shows you your investments, your transactions, and you can even create custom budgets, track progress toward financial goals, and even collaborate with your spouse, right? So now that you have a newborn, maybe it's time to actually sit down,

make a budget, collaborate together, and figure things out. And now you can get an extended 30-day free trial when you go to monarchmoney.com slash habits. There's going to be a link in the show notes below. I think the free trial for everyone else is just seven days, but because you use our code habits, you get a 30-day free trial. We always say how important it is to be tracking your investments and it's never been easier with monarch money. investments, budgeting, cash flow, subscriptions, and everything in between. There's a huge amount of people that use Monarch money to manage their finances, even as couples too.

My friend Jeff is saving for a car and with a significant other through Monarch. And it's also great for saving for a house, larger investments, or whatever you're building towards. So check them out at monarchmoney.com slash habits. That's M-O-N-A-R-C-H-M-O-N-E-Y. slash habits for your extended 30-day free trial. Major shout out to Monarch Money for supporting the podcast. We very much appreciate you guys.

Now, checklist number eight is a pretty important one, because as we begin to have more and more children, the house or apartment that we're living in begins to feel smaller and smaller. So my sister now has four children, and she just bought a five-bedroom house to help her raise these children in just outside of Atlanta here. So I guess the thing of, you know, consider your housing and how that might expand as you begin to grow a family is a really,

really important thing when you're kind of building out your checklist here. So Robert, what do you think about this point? I think it's a very slippery slope and I'm really glad we're covering it. Here's why. Let's say you've got the newborn or you've got two small children under five years old and you want to have more kids. So you're looking at housing and you're going, you know what? Let's just buy the four bedroom or the five bedroom house now and we'll grow into it. The problem I have with that is there's many reasons, but the first one is you're going to be house broke while you grow into that house in many situations. And so then what happens is it pushes the can, kicks the can down the road further for you to be putting away a reasonable

amount of money every single month towards retirement and towards your base in building your financial freedom. So I would rather see people start with a reasonably sized and priced home in the beginning, and then they can always upgrade down the road and live a little bit below their house needs in the beginning, at least for a few years, because it gives them that better opportunity to not be so strapped for too much house, which might end up being for three, four, five, or longer years to catch up for how much house they really need, because I see it all the time where people want to buy the dream home right out of the gate when they first get their first child or two children, and I don't think it's necessary.

Buy a house that works in the right neighborhood, maybe the right school district, and then worry about the dream home later when you're done building the family and you're really set up financially. I love that playbook. It reminds me, again, what my sister kind of did. I think she was living in a three bedroom house outside of Atlanta, and she started renting the house when she had her one son, and then she had her daughter, and, you know, Then they were like, wait a second, house is getting kind of small.

Then they had the third child and like, okay, we need to start saving for a house of our own something larger. And now with the fourth child, they began to really pull the trigger on that purchase. So, I mean, same playbook, right? Find something small that works for you in the beginning. And then as you actually grow, not just anticipate growing, but actually grow your family, this could be a really good way to begin to expand your living situation. Yeah, I mean, I'm guilty of it.

When I got married and I thought we were going to have a bunch of kids, I went right for the big house. We had six bedrooms, five bath, all this space. And then things did not work out as planned for us having children. And then I had this giant house where three or four bedrooms never got used, but I'm still paying for it. And that's why I just think it's better to stay away from the long-term plan more so because the anticipation, life gets in the way things change. And you can really find yourself in that house broke situation otherwise.

So I think it's better to be able to move. move and not get so tied up in the emotion of a particular home and then get the dream home later to me as a much better financial strategy. Now, Robert, something else you mentioned was the schooling, right? Buying a house in a school district that you're really excited about. And that's checkpoint number nine here. You know, kindergarten and elementary school are right around the corner after you have a child. So ask yourself, do you live in a school district that you like? Can the child choose to go to a different school for free if that's something they want to do because maybe the school that they're zoned for doesn't make sense if you don't like it. Don't like the teachers, whatever it might be,

sports, whatever that is for your situation. Do you have to go out and pay for private school, right? If that's the case, how expensive is it? How does that fit into your long-term financial goals? These are all questions you should be asking yourself sooner rather than later because the last thing you want to do is, you know, take your kid to fourth grade and realize that this school isn't something you want and the only alternatives of private school. That's 40,000. year and shock golly yeah so many people if you think about it this is eye opening talking about these points because i wonder how many married couples that are anticipating or just having children really do a financial calculation of how much more expensive their life becomes after child one

and after child two because it's not just we have to feed the kids you have to feed them you have school. You have larger vehicles are needed. You have baby strollers, baby carriages. You have all of this that comes into play. And I wonder how often people do the calculation, maybe out five or 10 years, to say, okay, I'm a W-2 employee and my job is likely going to grow, you know, my income two to three percent a year. But by having these children and moving into the bigger house, the bigger cars, all of that, that's going to cost me 18 percent more a year. Where does that difference come up? So I'm not trying to sound insensitive to wanting to build a family, but I want people to be realistic so they're not living a life of chasing money and always living beyond their means because they wanted the family.

And this preparation will really help them by going through this list and calculating what they really need with the children to be able to live the life that they desire. I couldn't have said it better myself. And back to what you were thinking of where does this money come from, unfortunately for many Americans, it's credit card debt, right? The average credit card balance for an American right now is $6,700. And so as we think about this checklist, right, this is an awesome opportunity. If your child is a newborn or if they're still a toddler, right, and you're just kind of flying by the seat of your pants, this is a great opportunity to sit down and figure out the budgeting side of the equation where as you begin to walk through these

different points, where does the money come from? Does it mean maybe you have to work a little bit extra? Where can you cut in the budget? Where are these things happening so that you can still fulfill your own financial goals and hit those goals in a reasonable amount of time? Now, Robert, the last point that we want to remind people of with their children are taxes. You now have dependence. And so here's what you can expect. A $2,000 tax credit, her child through age 16. And that is also refundable up to, I think it's like $16 or $1,700, which means if you didn't make enough money to like owe taxes, right? It's like, you know, credit. Well, what if you don't actually owe anything to credit against? You can still collect

more than $1,000 of that as a cash refund to you. So make sure that you keep that in mind whenever you are filing your taxes. Now, if you do make over $400,000 as a household, this begins to shrink and it completely goes away after $440,000 per year as a household is generated. So just keep that in mind. But again, if you're making that much money, you could probably pay for your children. Don't forget to if you adopt your child, you can earn a tax credit up to $14,890. I'm not going to pretend like I'm an expert on adoption and I don't think Robert is either, but do your own research. There's a ton of information online about tax credits for your children, if that's adoption or, you know, things like that. we're not going to pretend we are not CPAs always talk to your accountant when you're doing your

taxes we are just two guys on the internet but we do want to plant the seed and get you excited about filing your taxes now in a more strategic manner now that you have a newborn or a couple of children that's right it's not what you make it's what you keep and that's why we're always trying to flush out the most amazing strategies for each and every one of you and your friends that you share these podcasts with so it's so important and we enjoy it each and every day Wow, Robert, 10 checkpoints for everyone listening that has a child or a couple children to think about, right? We talked about the health insurance, getting that social security number, the DCFSA, planning for that child care, figuring out your term life insurance, those godparents and guardians, making that budget specifically budgeting for the 529 account, as well as consider your housing goals and where you are in that equation, schooling, private school, free school, what's going on there, as well. as filing your taxes in a new way. If you are a new parent, I'm excited for you. I don't have any

children yet, but I do hope that you learn something from this episode. It's kind of funny, we've just made this episode as two people that don't have children. So take it all with a great assault. But we are super excited that you decided to tune into this week's episode, Other Rich Habits podcast to learn more about this. And don't forget, share this episode with a friend who maybe just had that newborn, has a couple kids down the road, your neighbor, something like that, they could definitely take advantage of these. Now, before we jump into our question and answer edition of the show. Let's take a moment to hear from this episode, sponsor Preserve Gold. Robert and I talk about building a well-diversified portfolio all the time.

We believe after you've built your base, right, that $50,000 to $100,000, diversifying into alternative asset classes is usually a great idea, which is why we're hosting our webinar here on August 8th. And lucky for you, this episode, sponsor Preserve Gold, would agree with us. Gold, Robert, has outperformed bonds over the last 50 years and has proven to be a great hedge against inflation since 2020. The asset class is up 12.5% year to date and continues to show resilience during market volatility. So if you're looking to add physical gold or silver to your portfolio, get your free wealth protection guide from preserve gold. Learn how you can have gold and silver delivered directly to your door or inside of a Roth IRA. As you all know, I love silver and gold

and have for several years now. I personally would not suggest parking your entire life savings in the stuff, but we think having some of it included across your portfolio is a great diversification idea. To learn more about Preserve Gold, click the link in the show notes below or visit preservegold.com front slash rich habits. Again, that's preservegold.com front slash rich habits. To learn more about Preservegold, click the link in the show notes below to visit Preservegold.com. That's preservegold.com. All right, Robert, the first question we get is from Carter. I went to high school with him. Shout out Carter. We used to work out all the time. And he DM me this question. I was like,

oh my gosh, we've never talked about this on the podcast. Let's talk about it. He says, what is a rate buy down for your mortgage and when would they be useful? I'm looking to buy a house in the next year or so, and I'm not sure if this is something I should consider. Robert, I've never bought down my rates. I just kind of, but only two houses I have purchased. The first one was at like 3%. The second one was about six and a half percent, but I've not had to like buy down the rate. You probably know more about this than I do. So what is a rate buy down? When would someone want to use this? Like give me the play by play. Yeah, it's kind of that last kind of pro tip negotiation strategy, whereas when you're going to buy that house and I made a little kind of mathematical

equation, let's say the home is $300,000. Instead of you asking the seller to reduce the price of the home by $10,000, that would save you about $78 a month. in your payment, you would want to go in and ask the owner to give you a $10,000 credit to buy down your interest rate. And here's the kicker. That would be for one to three years, but your payment would go down $248. So instead of $78 a month, you get $248 right out of the gate in savings for that first one to three years. So it's a popular strategy these days for people that might be in a situation where the house is a little more expensive right now than they would like it to be, it gets you that savings out of the gate with hopes that down the road as interest

rates come back down because they're extremely high right now, that you would be at the desired payment level you would want to be after the buy down is over. That's all it is. So interest rates at the moment are about 7% they peaked you know a couple months ago at about 8% and so what you're saying is you can take that's you know this 10,000 dollar example you can take 10,000 dollars go to your lender rocket mortgage or whomever and say I want to buy a lower interest rate yeah you're not taking 10,000 dollars you're negotiating. Someone is I know that like for example people like Christian our producer he bought down his interest rate with his own money so you are taking some money. Yeah so that money in this instance you're hoping you can do it with your own money but in

this instance, you're hoping you can negotiate that $10,000 off the purchase price, but instead of taking it as a discount on the home, you're just going to use it to buy down the rate. So yes, either way, your money or the homeowner's money, but it is a great strategy at times when there's high interest rates on mortgages. And right now is one of those times. And so instead of a 7% interest rate, you would buy it down one, one and a half percent, making it now a 5% or 5.5% interest rate. And so... And it can be more depending on how much you're putting towards that buy down. But in this instance, yes, you're spot on. It's buying it down a point, point and a half to get you that almost $200 less payment per month out of the gate. And these are generally one to three year terms

just so everyone understands. What a great question, Carter. Thanks so much for asking it, man. Our next question comes from Roscio. Roscio says, can you please reshare the freedom calculator with us? I don't quite understand all the inputs. I'm still trying to learn this stuff. So for everyone listening that might not remember, we made a podcast episode talking about how to calculate your freedom number. Now, your freedom number can also be described as your FU number, right? It's your retirement money.

It's the I have so much money that the income generated from my portfolio completely offsets my monthly living expenses. Now, for some people, this might be three, four, five thousand, or maybe it's seven, eight, 9,000, just depending on how much you're spending every month. For me, I land around $6,000 a month, but I do pay two mortgages. I do have a rental property, but maybe that doesn't count. Anyway, so here's how you do at Rosario. What you want to do is you want to take your monthly expenses. I'll do this in real time, so let me pull up a calculator. And let's say your monthly expenses are $4,000. You want to multiply that by $12, and now you have your annual expenses, $48,000. So you spend

on average now $48,000 per year. Now you have this $48,000. figure. What you want to do now is divide this number on a calculator, hit the divide. 0.04. Now the number is $1.2 million. So what this does, Robert, is if you have $1.2 million sitting in a brokerage account and you take out 4% every single year, which is back to the Trinity study, we've known that if you take out this 4%, you have it well diversified, you're never going to run out of money, including inflation here. So if you take out 4% per year of this $1.2 million, portfolio, you can use that income to pay for all of your monthly expenses and your annual living expenses. And now you're free, right? That's your freedom number. So Rosio, again, you take your

monthly expenses, multiply it by 12 to get your annual expenses and then divide your annual expenses by 0.04. If you want to be a little less conservative, you can do 0.05. The number comes down just a little bit to 960,000, but you know, plus or minus 40 grand, 50 grand here, you now have a million dollars that is now paying for all of your annual expenses. You're now free. That's your freedom number. I love it. That's a great explanation. It's really just about people understanding 20 years in advance, 10 years in advance, whatever the number is of what it's going to take for them to have invested in these accounts to be able to use the Trinity study, the 4% rule, and be able to not run out of money in retirement.

Could you spend 10% a year of your retirement? Absolutely. But instead of having money for 30 years in retirement, it might knock you down to 12 years or 14 years. And you have to be careful with that equation because people are living longer. Medicine is getting better. Healthcare is getting better.

And it's just important to want to have that freedom from anxiety about money as you retire. So this is a great question. We love answering this one all the time. And just from the same page, too, assuming you're 35 years old, you want to retire at 65, 67, you get that 8, 10, 12% per year in the markets, and you contribute $500 a month. Well, you're going to end up now with over $2 million in retirement, much more than that $1.2 million example.

So you now know how to do it. Now you just got to figure out what that monthly investment is that's going to get you there. So our last question comes from Wayne. Wayne says I've been listening to your podcast for a while. I love it. Thank you so much for all you do. I can't wait to listen every single week. My question is this.

I've been dollar cost averaging into both gold and the S&P 500. But the thing is, I'm kind of scared. I want to stop. I think the S&P 500 is really high right now, and I think it's going to come down. So do I stop dollar cost averaging and wait for a pullback? Do I keep doing it? What do I do? Robert, please share with Wayne the phrase that he needs to tattoo on his forehead.

That is correct. Wayne, we love the question. Here it is. It's not about timing the market. It's about time in the market. We could do a whole episode just on what happens if you missed the 10 best days of the last 20 years in the S&P 500. So yes, our tech stocks high, absolutely, is the magnificent seven keeping the S&P 500 propped up for the last two years. Absolutely. But over time, I would never bet against the S&P 500, nor would I try to time it. I think everyone that listens to this podcast and everyone over 18 investing should start their investing portfolios with B.O. And I think it is the greatest investment vehicle there is through a Roth IRA on the planet full stop. So for me, the answer is no. I would keep dollar

cost averaging because even if we see a pullback in 2025 or later in 2024, we are always going to see that movement go back into the right, up into the right in the S&P 500 and trying to time it is an exercise in futility in my opinion. Everyone, thank you so much for tuning in to this week's episode of the Rich Habits podcast. Do not forget, we are hosting a webinar all about angel investing and building up a little bit of startup equity in our well-diversified portfolio. It's completely free. There's a link to join in the show notes below. Go save your seat. Again, you guys know this. We only have a thousand seats. And if we sell out, we sell out. You won't be able to come and check it out. So please, please, please join us for that. Be the first 1,000 people there. And we can't wait to share with you how we've built diversified startup equity portfolios. You know, Robert, I don't like to brag. But one of the companies that I invested into in 2021, I got in at a, I think it was a $18 million valuation. And right now, they're valued over $350 million.

Man, oh man, well, you are definitely buying the Rich Habits Network yacht then because that is amazing. I love it. Well, I don't have all that, right? I just have a small slice of it. But same deal, right? We want to show you guys how to be, you know, like the Mark Cubans and the Laurie Grenier's and the Damon Johns and the Kevin O'Leary is a shark tank, right? We have opportunities to invest in companies, not just companies too, Robert, but like real estate

syndications. I've got a friend that has this like really successful Airbnb business and he's like, yeah, we're raising funds now for investors. And I'm like, why don't we share this with our rich habits community? So just we get all these crazy opportunities to invest in some really cool things. And this is what the webinar is going to be about educating, sharing. And hopefully we get to make some really cool investments alongside you guys. Thanks, everyone. We've all been there. The watch party finally makes it out of the group chat. And uh-oh, you volunteered to host. Suddenly you need snacks, drinks, dips, cups, and all the other party essentials. With Instacart, you can get all those groceries delivered in as fast as 60 minutes.

No extra errands for you. One quick order for everyone. That way, everything shows up right on time, making hosting easy and, like you had it planned all along. Download the Instacart app today and get no markups at select retailers. Fees and exclusions apply. For joining us, and we'll see you very soon. Have a great start to your week.